I agree that he should be recast for CA2, but I also think he should not make a "true" appearance in the movie. That is to say, I think the whole "Red Skull disguised as a higher-up government official" angle might work fairly well. They could introduce a new character in the film that is ultimately revealed in CA3 (or the end of CA2) to have been Red Skull all along with a new mask.

For CA2, though, I'd much rather the main villain be someone like Zola or Zemo. In fact, if Zola ended up making another appearance (which is a possibility, given the android blueprint easter egg and Zola's "This energy we have collected could power my designs...all my designs..." comment), and it is revealed that Zola is behind TWS's appearance: it'd potentially make for very nice flow and continuity between the two movies.